More bad news for India's economy

Global financial services firm Credit Suisse has lowered India's growth forecast for this fiscal year to 6 per cent from 6.5 per cent, and for financial year 2014-15 to 7 per cent from 7.5 per cent earlier.

Credit Suisse in a research note said that ‘we have cut our 2013/14 year average GDP growth forecast to 6 per cent from 6.5 per cent, while also lowering our 2014/15 projection by half percentage points to 7 per cent’.

"This still leaves us at the top of the consensus range," it said adding that fundamentals of the country are clearly more supportive of activity in 2013/14 than they were in 2012/13.

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The country's economic growth hit a decade low of 5 per cent in the last fiscal on account of poor performance in the farm, manufacturing and mining sectors.

"Amidst a tidal-wave of gloom concerning India's macro-economy it is hard to be optimistic about the country's growth prospects.

“However, we continue to believe the fundamentals are more supportive than generally assumed," Credit Suisse said.

Notwithstanding the fact that "the current feeling of gloom is seemingly all pervasive as business and consumer confidence continue to shrink, the hard data continue to soften, the rupee faces substantial pressure, the Reserve Bank of India tightens liquidity and political factors remain unhelpful," Credit Suisse said "we, however, have not thrown in the towel".

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"In some ways, the current situation reminds us of mid-2012 when virtually everyone had given up hope of ever seeing wholesale price inflation fall and the central bank cutting policy rates further.

“Sometimes patience is indeed a virtue," it said.

Meanwhile, the central bank, in its First Quarter Review of Monetary Policy on July 30, had cut the growth projection for 2013-14 to 5.5 per cent from an earlier estimate of 5.7 per cent.

The government in February estimated 6.5 per cent growth for 2013-14.

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Earlier last month, the Asian Development Bank lowered its growth projection for India to 5.8 per cent in calendar 2013 from 6 per cent estimated previously, citing the slow progress of economic reforms.

According to foreign brokerage Bank of America Merrill Lynch prolonging the recent liquidity tightening moves by the Reserve Bank may have an adverse impact on GDP growth which could slip to a low of 4.8 per cent.

Meanwhile, Morgan Stanley in a research note, said that the recent monetary tightening and uncertain global capital market environment could mean growth stays low for at least two more quarters and increases the risk of GDP growth sliding to 3.5-4 per cent.